Technical Analysis

Bellwethers: SBI, ITC, Infosys, Reliance, Tata Steel

Gurumurthy K | Updated on January 17, 2018 Published on August 07, 2016






SBI (₹232.8)

SBI likely to break its range on the upside

The 3 per cent gain on Friday boosted the bullish momentum in SBI, though the stock still trades in the ₹222-₹235 range. The bias remains positive and the stock is likely to breakout above ₹235 in the coming days. A strong rise above ₹235 can take the stock higher to ₹242 – the 50 per cent Fibonacci retracement resistance or ₹246 – the 100-week moving average resistance in the short-term. Further break above ₹246 will open doors for the next targets of ₹255 and ₹265 thereafter over the medium-term. A strong trendline support at ₹220 can limit the downside even if the stock falls below ₹222. The outlook will turn negative only if SBI breaks below ₹220. The next targets will be ₹215 and ₹210. But the price action on the charts suggest that a decisive break below ₹220 is less likely. Short-term traders hold the long positions with the same stop-loss at ₹218 for the target of ₹250. Medium-term investors can continue to accumulate on dips near ₹222 and ₹220. Retain stop loss at ₹199 for the target of ₹255.

ITC (₹251.4)

ITC remains range bound with a bullish bias

ITC surged over 4 per cent on Tuesday to a weekly high of ₹262. But the stock reversed sharply the very next day and gave back all the gains. The stock still continues to trade in a narrow range above the 21-day moving average support at ₹250. A strong break and a close below ₹250 will increase the downside pressure and drag it to ₹245 initially. Further if it breaks below ₹245 the fall can extend to ₹240. However, as being reiterated over the last few weeks, ₹245 and ₹240 are strong supports that can limit the downside in the stock. So such falls to these levels will be a good buying opportunity. Having said this, ITC is more likely to break above the immediate resistance at ₹255 going forward. Such break can take it to ₹260 initially. A decisive break and close above ₹260 will boost the momentum for the next target of ₹268 and ₹270 in the short-term and even ₹290 over a medium-term time frame.Investors with a medium-term horizon can hold long positions and accumulate near ₹241 if the stock falls below ₹246. Retain stop-loss at ₹228 for the target of ₹270.

Infosys (₹1,067.4)

Infosys gives fresh signs of a fall

Infosys is giving out fresh signs offalling further. The stock dropped below an important support levels around ₹1,070 on Friday which may now amplify its downward pressure. Though the weekly chart keeps alive the possibility of a range bound move, the daily charts are giving bearish signals. A wedge pattern is visible on the daily chart and Friday’s fall has broken this pattern below the support at ₹1,070. Also the inability to break above ₹1,090 over the last three weeks keeps the broader bearish outlook intact. Resistance is now in between ₹1,073 and ₹1,075. A fall to ₹1,050 looks likely in the near-term. A strong break below ₹1,050 can drag the stock lower to ₹1,000 over the short-term. If the stock manages to bounce from this psychological support level of ₹1,000, a range bound move between ₹1,000 and ₹1,100 is possible for some time. But a strong break below ₹1,000 mark will see Infosys tumbling to ₹918 over the medium-term. The region between ₹1,090 and ₹1,100 is an important resistance to watch out for. The bearish outlook will ease only if the stock manages to cross ₹1,100 decisively.

RIL (₹1,014.5)

Bullish outlook is intact for RIL

The threat of the outlook turning negative for RIL was erased after the strong 2 per cent bounce on Friday. The stock declined below its key support of ₹1,000 falling to ₹984.5 on Thursday but has bounced back. Technically, the 200-day moving average has halted the fall. Inability to extend its fall strongly below ₹1,000 and a sharp reversal keeps the overall view positive. A revisit of the resistance at ₹1,030 looks likely this week. A strong break above it will boost the momentum and take RIL higher to ₹1,040 and ₹1,050 immediately. Further break above ₹1,050 will open doors for the next target of ₹1,070 or even ₹1,100. Short-term investors who have taken long positions last week on dips near ₹1,000 can hold it. Retain stop-loss at ₹975 for a target of ₹1,060. Revise the stop-loss higher to ₹1,015 as soon as the stock crosses ₹1,045. The outlook will turn negative only if the stock declines decisively below ₹985. The next targets will be ₹950 or ₹935. But the sharp reversal last week diminishes the possibility of the stock breaking below ₹985.

Tata Steel (₹380.9)

Tata Steel is on a strong footing

Tata Steel surged 7 per cent last week thereby ending the two consecutive weeks of fall. A flag pattern has formed since mid July and last week’s strong rise has broken the pattern resistance around ₹370 decisively. The target of this pattern is ₹392 which is likely to be attained in the near-term with a strong support in the ₹375-₹370 zone. The medium-term bullish outlook is also intact. A rally breaking above ₹400 with targets of ₹430 or even ₹450 looks likely over this time period. Medium-term investors can hold long positions. Retain stop-loss at the revised level of ₹310. The 21-day moving average at ₹360 continues to provide strong support. Also there is a strong support in the ₹350-₹340 region and then the 21-week moving average support is at ₹335. These series of supports lowers the possibility of the stock falling sharply in the coming days. It also suggests that in case of any intermediate dips fresh buying interest can emerge. Having said this, Tata Steel is on a strong footing and is all set to revisit ₹400 or even higher levels.

Published on August 07, 2016
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